Uganda picks refinery investors

President Yoweri Museveni with Jay Ireland (left), President and CEO GE Africa with Alexander Oketch of GE General Electric

Uganda said on Monday it had agreed preliminary terms with a consortium of investors, including General Electric to build and operate the country's first oil refinery, reviving a much-delayed project.

The Government geologists estimate Uganda's oil reserves at 6.5 billion barrels, of which 1.4-1.7 billion are considered recoverable.

The Albertine Graben Refinery Consortium, which also includes Yaatra Ventures LLC, Intracontinental Asset Holdings Ltd. and Italy's Saipem SpA, was picked after a review of more than 40 companies, Uganda's Energy Ministry said Monday in a statement. 

The oil is due to start flowing in 2020 and the government is keen to build a refinery to process it and retain a larger slice of profit

Uganda has been seeking a new developer for the $4 billion facility since negotiations with groups led by Russia's RT Global Resources LLC and South Korea's SK Engineering & Construction Co. collapsed. GE has recently expanded in the industry by teaming up with Baker Hughes Inc., while Saipem, a $4.1 billion company based in Milan, has operated for more than 50 years.

"The risk to the project getting delivered is smaller because those companies are both very good at what they do," Alan Gelder, vice-president of refining, chemicals and oil markets at consultants Wood Mackenzie Ltd., said by phone.

Gelder said it's hard to estimate a cost for the project because Uganda doesn't yet have all the infrastructure it needs to bring equipment into the landlocked country.

The government expects to conclude a project framework agreement with the developers over the next two months, according to the energy ministry. 

"The consortium has proposed to government a financing approach and a path to establish, develop and operate a commercially-viable refinery company with a strategic benefit to the country and the region," the ministry said. "The oil refinery is expected to spur growth of petrochemical and other related industries in Uganda."

Energy and Minerals Development Minister Irene Muloni said in November that France's Total, one of three oil explorers operating in the country, wanted to take up a 10 percent stake in the refinery project.